That's Life: Creditors Have Better Memories Than Debtors
That's Life: Creditors Have Better Memories Than Debtors
Regardless of the economic climate, most dental laboratories will experience collection difficulties sooner or later. Accounts receivable are your laboratory’s major asset, and provide the funds for continued operation. Since very few dental laboratories, especially smaller ones utilize any sort of credit reporting agency, credit is usually extended as a professional courtesy.
There are some people who believe that all new accounts should be placed on a COD basis until a relationship has been established. Regardless of how you go about establishing your credit policy, eventually you will be placed in the uncomfortable position of having to apply some gentle or not so gentle pressure to collect your money.
To do the job completely, there are two objectives to reach. The first is to get the money; the second, to retain the customer’s good will. Some times we concentrate so hard on the first objective that we overlook the second. In my laboratory, we have a policy that every employee is a member of the sales department, and try to recognize that everything we do may help or hinder our sales efforts.
The actual attainment of this ideal is not as easy as it may seem. The matters discussed are often irritating and with some individuals, no amount of diplomacy or understanding on the part of the collector can make them seem otherwise.
Naturally, all collection efforts begin when the payment is due, although a short grace period is usually allowed before the first shot is fired. The same action ends –if they stretch that far- when legal action is filed. Between these two points, your feelings about the account will go through a number of changes. At first we are only mildly concerned, and the tone of the call or written reminder is casual. As time goes on, and as successive attempts at collection fail, we begin to worry and our fuse grows progressively shorter.
It is during these later stages that some laboratory owners (like me) break down and begin to say things which only cause more trouble. This loss of control is understandable for the provocation is great; nevertheless, it is not in keeping with the goodwill objectives of the company, and it seldom helps in making a collection.
Our collection efforts are usually conducted in three stages. 1) We simply tell the customer that the bill is past due. 2) We use a technique which saves face for the customer by suggesting that he has no doubt overlooked the payment. 3) Finally, we advance the idea that the customer should not be indifferent to his obligation. Following are three collection letters showing incremental pressure:
Dear Dr. Smith:
You will note from the attached statement that a number of charges have gone beyond our regular terms.
We realize that it is sometimes difficult to process a payment for all of your vendors on their exact due date. But now that you have our monthly statement before you, won’t you please put through our overdue items for payment?
We appreciate the splendid cooperation you have always given us and shall look forward to hearing from you soon.
Dear Dr. Smith,
Once when Lincoln was poor and hungry, a stranger approached him and requested change for a twenty-dollar bill.
Being without a cent, and seeing the humor of the situation, Lincoln stooped down and confided, “Sorry I can’t oblige you stranger, but I thank you for the compliment just the same.”
Some of our friends pay us the same compliment that this stranger paid Lincoln. They let their account stand on the books, thinking no doubt that we don’t need the money. But we do. You would be surprised.
Perhaps you simply overlooked our statement. In either event, won’t you please give this little account of yours the necessary attention, and let us have a check within the week?
Dear Dr. Smith:
For some time now we have been trying to collect on the outstanding balance of your account. We must know your intentions before we go any further.
Collecting long-overdue accounts leads to many problems, most of them unpleasant for us and for you. If you’ll tell us your situation now, perhaps we can still settle amicably. Certainly we’ll do what we can to make it as easy as possible for you.
Please do something TODAY. A check if you can, but some statement of your intentions at the very least. If we don’t hear from you, we’ll have no choice but to go ahead will legal measures we prefer not to use.
The End of the Rope:
No laboratory owner reaches the last stage in his collection efforts without considerable regret. He wonders what he might have done differently to gain favorable results. Nobody likes to lose money to a collection attorney, and nobody likes losing an account.
If I have an account that has not responded to any other collection efforts, I contact the chamber of commerce in the city where the customer has his practice. I will give the chamber the doctor’s address, and ask for the name of an attorney as close to that physical address as possible. If I can find an attorney in the same building that’s even better. Next, I ask him to draft a five-day notice and deliver it to the dentist by hand. This will usually cost about $100, but may save me from giving as much as half to an attorney collecting on a contingency basis.
Occasionally, we have no choice but to take the case to court to collect our money. In that case, it pays to have had a solid contract in effect, which protects our interests, allows us to also recover any reasonable expense incurred to collect on the account, and to receive the maximum amount of interest allowed by law. Naturally, getting the customer to sign such an agreement may be difficult, so I suggest you incorporate this agreement onto the back of your prescription sheet. This in effect has become you contract. Keep a signed copy of at least one prescription form in the doctor’s file just in case.
